PUBLISH UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

________________ _________________ FRONT RANGE EQUINE RESCUE; THE HUMANE SOCIETY OF THE UNITED STATES; MARIN HUMANE SOCIETY; HORSES FOR LIFE FOUNDATION; RETURN TO FREEDOM; RAMONA CORDOVA; KRYSTLE SMITH; CASSIE GROSS; DEBORAH TRAHAN; BARBARA SINK; CHIEF DAVID BALD EAGLE; CHIEF ARVOL LOOKING HORSE; TANYA LITTLEWOLF; ROXANNE TALLTR EE-DOUGLAS; FOUNDATION TO PROTECT NEW MEXICO WILDLIFE; SANDY SCHAEFER, Plaintiffs - Appellees , and STATE OF NEW MEXICO, Intervenor Plaintiff - Appellee,

v. TOM VILSACK, Secretary, United States Department of Agriculture; ELIZABETH A. HAGEN, Under Secretary for Food Safety, United States Department of Agriculture; ALFRED A. ALMANZA, Administrator, Food Safety and Inspection Services, United States Department of Agriculture, Defendants, No. 16-2054 FILED United States Court of Appeals Tenth Circuit 

### January 4, 2017

Elisabeth A. Shumaker Clerk of Court2 RESPONSIBLE TRANSPORTATION, LLC; CONFEDERATED TRIBES AND BANDS OF THE YAKAMA NATION; RAINS NATURAL MEATS; CHEVALINE, LLC; INTERNATIONAL EQUINE BUSINESS ASSOCIATION; NEW MEXICO CATTLEGROWERS’ ASSOCIATION; SOUTH DAKOTA STOCKGROWERS ASSOCIATION; RANCHERS-CATTLEMEN ACTION LEGAL FUND UNITED STOCKGROWERS OF AMERICA; MARCY BRITTON; BILL WOOD; JAN WOOD; LEROY WETZ; SHIRLEY WETZ; DOUG JOHNSON; JUDY JOHNSON; KUJYUKURI, LTD; UNITED HORSEMEN; SCENIC VIEW RANCH, Intervenors Defendants,

and VALLEY MEAT COMPANY, LLC,

Interven or Defendant - Appellant.

________________ _________________ Appeal from the United States District Court for the District of New Mexico (D.C. No. 1:13-CV-00639-MCA-KK)

________________ _________________ A. Blair Dunn (Dori E. Richards with her on the briefs), Western Agriculture, Resource and Business Advocates, LLP, Albuquerque, New Mexico for Intervenor DefendantAppellant. Adam Diederich, Schiff Hardin, LLP, Chic ago, Illinois (Bruce A. Wagman, Schiff Hardin LLP, San Francisco, California; Samu el C. Wolf, Jones, Snead, Wertheim & Clifford, P.A, Santa Fe, New Mexico, and Ari Biernoff, Office of the Attorney General, Santa Fe, New Mexico, with him on the brie fs) for Plaintiffs-Appellees and Intervenor Plaintiff-Appellee.

________________ _________________3 Before HOLMES , MATHESON , and McHUGH , Circuit Judges.

________________ _________________ McHUGH , Circuit Judge.

________________ _________________ Valley Meat Company, LLC appeals the di strict court’s denial of its motion to collect on an injunction bond. Exer cising jurisdiction under 28 U.S.C. § 1291, we

affirm.

I. BACKGROUND The Food Safety Inspection Service (FSI S), a branch of the United States Department of Agriculture (USDA), is responsible for inspecting equine slaughterhouses, and a grant of inspection is required for th e commercial slaughter of horses, mules, and other equines for human consump tion. 21 U.S.C. § 603(a). Between fiscal years 2006 and 2011, Congress prohib ited the use of funds for inspection, thereby preventi ng commercial equine slaughte r. In fiscal year 2012, Congress lifted the ban on funding and FSIS received several applications for inspection. The agency issu ed grants of inspection to two commercial equine slaughter facilities: Valley Meat Compa ny, LLC and Responsib le Transportation,

LLC. 1 In response, Front Range Equine Resc ue, the Humane Society of the United States, and several other indi viduals and organizations (col lectively, “Front Range”) sued officials of the USDA (“Federal Defenda nts”), seeking a decl aration that grants

1 A third facility, Rains Natural Meats, applied fo r inspection, but FSIS was not able to issue a grant of inspection before the initiation of this lawsuit.4 of inspection generally violated the National Environmental Policy Act and requesting that the court set aside the specific grants of inspection to Valley Meat and Responsible Transportation. Front Range also moved to enjoin the Federal Defendants from authorizing e quine slaughter during the pendency of the claims. Subsequently, Valley Meat and Responsible Transportati on each filed motions to intervene, which the di strict court granted. 2 The district court then granted Fr ont Range’s motion for a temporary restraining order (TRO), prohibiting the Federal Defendants from sending inspectors to the equine slaughterhouses of, or othe rwise providing equine inspection services to, Valley Meat and Responsible Tr ansportation. The court additionally sua sponte enjoined Valley Meat and Responsible Tr ansportation from enga ging in commercial equine slaughter. Finally, the court ordere d Front Range to post injunction bonds of $435,000 for Valley Meat and $60,000 for Responsible Trans portation, “for the time period August 5, 2013 through September 1, 2013.” Twelve days later, Front Range filed a motion to modify the TRO, an obj ection to the order requiring it to post an injunction bond, and a reque st for expedited review. Front Range claimed the injunction against Valley Meat and Respons ible Transportation was invalid because Front Range had sued and sought relief from only the Federal Defendants. Without waiving this objection, Front Range posted the bond as or dered. Valley Meat opposed Front Range’s motion, arguing th at it should be restrained and Front Range should be

2 Rains Natural Meats also intervened , but was not subject to the TRO.5 required to post the bond because an in junction against the Federal Defendants effectively also enjo ins its operations.

The district court never ruled on Front Range’s motion, but on November 1, 2013, it denied Front Range’s request for a permanent injunction and dismissed the action. Front Range immediately appealed th e decision to this court. In order to provide adequate time to c onsider the merits, we tempor arily enjoined the Federal Defendants from sending inspectors but did not enjoin Valley Meat or Responsible Transportation. We subsequently dismissed the appeal as moot in Front Range Equine Rescue

v. Vilsack , 782 F.3d 565 (10th Ci r. 2015) [hereinafter Front Range I ]. We first concluded the appeal was m oot because Congress resumed its funding prohibition for equine inspections beginning in 2014, ma king it once again unlawful to engage in commercial equine slaughter for human consumption. Id. at 568. And second, we noted that while the appeal was pending, Valley Meat “d ecided to abandon all plans to slaughter equines and asked FSIS to withdraw its grant of inspection.” Id. Upon concluding that the matter was m oot, we vacated the district court’s order denying a permanent injunction, “bas ed on the underlying equitable principle that a party should not have to bear the consequences of an adverse ruling when frustrated by the vagaries of the circumstances.” Id. at 571 (alterations and internal quotation marks omitted). And the “vagaries of the circumstances” we identified here

were unilateral actions take n by Valley Meat and Congress, not any actions taken by Front Range.6 Valley Meat and Responsible Transportati on then filed a motion in the district court to recover the injunc tion bond. A magistrate ju dge recommended that the motion be denied, and the district court a dopted the magistrate’s recommendation in full. Valley Meat now appeals the deni al of damages on the injunction bond. 3

II. DISCUSSION As a prerequisite to the issuance of a preliminary injunction, Federal Rule of Civil Procedure 65(c) requires the moving pa rty to post a security bond “to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). We revi ew a district court’s decision to grant or deny damages on a bond for abuse of discreti on, which occurs when the court “(1) enters ‘an arbitrary, capricious, whimsica l, or manifestly unreasonable judgment’ or (2) applies the wrong legal standard.” Sprint Nextel Corp. v. Middle Man, Inc. , 822 F.3d 524, 535 (10t h Cir. 2016) (cita tion omitted). Here the parties dispute what the correct legal standard is. Front Range cites Tenth Circuit precedent, which holds that “the decision whether to award damages, and the extent thereof, is in the discreti on of the district c ourt and is based upon considerations of equity and justice.” Kansas ex rel. Stephan v. Adams , 705 F.2d 1267, 1269 (10t h Cir. 1983); see also Sierra Club v. Hodel , 848 F.2d 1068, 1097 (10th Cir. 1988); Monroe Div., Litton Bus. Sys., Inc. v. De Bari , 562 F.2d 30, 33 (10th Cir. 1977) (“Equity comes into pl ay in determining whether there may be recovery and the amount thereof.”); Robson v. R & R Fur Co. , 1993 WL 34680, at *2

3 Responsible Transportation doe s not join in the appeal.7 (10th Cir. Feb. 8, 1993) (unpublished) (“Following a de termination that damages were suffered, the district court exercise s its equity powers in deciding whether to award damages against the bond and in what amount.”). Valley Meat cites to cases fro m other circuits that it contends apply a different

standard of review for denial of rec overy under a bond posted under Rule 65(c). See Coyne-Delany Co. v. Capital Dev. Bd. of State of Ill. , 717 F.2d 385, 391 (7th Cir. 1983) (“[A] prevailing defendant is entitled to damages on the injunction bond unless there is a good reason for not requiring the plaintiff to pa y in the particular case.”); Nat’l Kidney Patients Ass’n v. Sullivan , 958 F.2d 1127, 1134 (D.C. Cir. 1992) (“The preference for allowance of damages is a solid one; it justifies disallowance only where there is good reason.”). However, neither the parties nor the district court relied on our earlier precedent in Atomic Oil Co. of Okl. v. Bardahl Oil Co. , 4 which severely constricts the scope of a district court’s di scretion to deny recovery to a wrongfully enjoined party. 419 F.2d 1097 (10th Cir. 1969). There, a panel of this cour t noted that “the discretion

of the trial court to refuse to award dama ges on an injunction bond in an appropriate case has been largely circumscribed sin ce the existence of Rule 65(c) and its predecessor.” 419 F.3d at 1100. We further explained: The manifest purpose of Rule 65(c) , evidenced by its plain language, strongly contraindicates the proposition that the court which issues an injunction should have the power to foreclose recovery on the injunction bond, when such recovery devolve s upon the substantive correctness of

4 Valley Meat mentions this case in its Opening Brief, but does so for an unrelated proposition.8 the determinations of the very sa me court. Rule 65(c) states in mandatory language that th e giving of security is an absolute condition precedent to the issuance of a preliminary injunction. It imports no discretion to the trial court to miti gate or nullify that undertaking after the injunction has issued.

Id. at 1100–01 (emphasis added). The limits on a district court’ s discretion under

Atomic Oil appear to conflict with the broad discretion to award or deny damages “based upon considerations of e quity and justice” outlined in Stephan . And in this circuit, “we are obligated to follow the earlier panel d ecision over the later one.”

Hiller v. Okla. ex rel. Used Motor Vehicle & Parts Comm’n , 327 F.3d 1247, 1251 (10th Cir. 2003). Therefore, where there is a finding th at a defendant has been wrongfully enjoined, there is a presumpti on of recovery and the district court’s discretion to deny damages is limited. Here, the district court based its d ecision to deny Valley Meat’s motion to collect on three independent grounds: (1) there was never a finding that Valley Meat was wrongfully enjoined, nor did Valley M eat request such a finding; (2) Front Range never sued Valley Meat nor asked fo r it to be enjoined , rather the court restrained Valley Meat sua sponte ; and (3) it would be ine quitable to award damages where Front Range raised legitimate envi ronmental concerns and litigated in good faith. Although the district court’s an alysis goes beyond that sanctioned by Atomic

Oil , we affirm because Atomic Oil ’s presumption in favor of damages does not apply

where there was never a findi ng of wrongful enjoinment.9 A. There Is No Finding that Valley Meat Was Wrongfully Enjoined Valley Meat argues it was wrongfully enjoin ed, and that even though this court vacated the district court’s denial of a pe rmanent injunction, “a district court must retain jurisdiction to award costs and damages from a bond despite the vitiating of the underlying suit.” In Atomic Oil Co. of Oklaho ma v. Bardahl Oil Co. , we recognized a defendant’s right to rec over damages on an injuncti on bond. 419 F.2d 1097, 1101 (10th Cir. 1969). But a prere quisite to recovery is a fi nding that the defendant was wrongfully enjoined. See Fed. R. Civ. P. 65(c) (explai ning the purpose of the bond is “to pay the costs and damage s sustained by any party found to have been wrongfully enjoined”); Robson , 1993 WL 34680, at *2 (“[T]o pr evail in an action to recover on [an] injunction bond, [the de fendant] must prove that the injunction was wrongful and that he did have the right to enga ge in the enterpri ses enjoined.”). On appeal, Valley Meat argues it was wrongfully enjoined because it was a “prevailing party” after the di strict court denied a perman ent injunction. But there has never been a ruling that Valley Meat was wrongfully enjoined. Although the district court denied a permanent injunction, we vacated that order. We did so after concluding the appeal was moot both b ecause Valley Meat had withdrawn its application for inspection and because Congress had defunded FSIS equine inspections, thereby again prohibiting comme rcial equine slaughter in the United States. The purpose of vacating the order wa s to preclude it “from spawning any legal consequences,” Rio Grande Silvery Minnow v. Bureau of Reclamation , 601 F.3d 1096, 1132 (10th Cir. 2010). We accordingly reject Va lley Meat’s suggestion that the10 district court’s orde r denying a permanent injunction can be relied upon to show wrongful enjoinment. Valley Meat has also failed to point us to any place in th e record where it sought a determination, from either the distri ct court or this cour t, that it had been wrongfully restrained. Valley Meat instead focuses on the damages it claims to have sustained from the injunction, to argue the district court imprope rly denied recovery. Valley Meat contends that “[i]ssuance of the bond to compensate for [Valley Meat’s] damages is a collateral matter which the Di strict Court continued to have jurisdiction to resolve.” And it points to the district court’s findi ng at the bond hearing that Valley Meat would “suffer harm and injury by virtue of the temporary restraining order . . . . The amount of these damages and losses are ascerta inable.” Even if Valley Meat did suffer damage s as a result of the TRO, 5 it cannot recover against the bond unless it first shows wrongful enjoinme nt. As discussed, it has failed to do so. Accordingly, the district court did not abuse its discretion in denying recovery against the injunction bond b ecause there was never a ruli ng that Valley Meat was wrongfully enjoined. This conclusion alone is enough to affirm the district court’s

decision.

5 The district court found that while Va lley Meat “failed to profit from [its] investment in a controversial, high-risk , and ultimately evanes cent business during the few months when it may otherwise have been permitte d, the record is unclear regarding whether the Court’s TRO alone was responsible for this situation. . . . The record is also unclear rega rding whether Valley Meat’s . . . lost profits, even if proximately caused by the TRO, were as high as predicted.”11 III. CONCLUSION The district court did not abuse its di scretion in concluding that Valley Meat could not collect damages where there had been no finding that it was wrongfully enjoined. We therefore AFFIRM the district court’s denial of Valley Meat’s motion to recover damages agai nst the injunction bond.